Their Oil Under Their Sand

Some news items from this week: First, “Iraqi Oil Workers' Union Threatens Strike to Block New Oil Law,” Bloomberg, 26 June 2008, http://www.bloomberg.com/apps/news?pid=20601072&sid=aqw8Ov90wow8&refer=energy. This story describes another round in the continuing saga of how the West, specifically the United States, is seeking to achieve the goal for which it fought the Iraqi war: to gain control of Iraq's oil reserves so that they could be owned and exploited by Western international oil companies. The first installment of that story involved the appointment of Lewis Paul Bremer III by President Bush to oversee the management of the Iraqi economy and national resources after the removal of Saddam Hussein. As the “governor” of Iraq, Mr. Bremer issued 100 orders to the Iraqi people. These orders commanded the nearly complete privatization of of Iraq's state-owned enterprises, the allowing of up to 100 percent foreign ownership of Iraqi businesses, and the granting of full immunity from prosecution to all foreign contractors, including private security firms. (Sources: Wikipedia, http://en.wikipedia.org/wiki/Iraq_oil#After_the_Fall_of_Saddam_Hussein and http://en.wikipedia.org/wiki/Paul_Bremer)

Mr. Bremer served as “governor from May 2003 to June 2004, when he was replaced by the first of several governing bodies largely picked by overseers from the United States government. From February 2007 onward, President Bush has been pressing the Iraqi government to pass a national “oil law” which would formalize many of the policies begun by Paul Bremer. This oil law would give overwhelming control of Iraqi oil reserves and production to foreign international oil companies like Royal Dutch Shell and Exxon Mobil, on terms far more generous than those granted by any other Mideast oil-producing nation. (Source: Oil Change International website, http://priceofoil.org/wp-content/uploads/2007/05/IOLupdate052107.pdf) While this law was stalled in negotiations for over a year, it now seems very close to ratification.

Why is the Iraqi Oil Workers' Union threatening to strike if this law is implemented? Because they resent seeing their nation become yet another victim of globalism – a nation whose natural resources are extracted by foreigners who reap fantastic profits while paying slave wages to the citizens of the nation for the “privilege” of working for these foreigners. It must be especially galling to the Iraqis, whose country was invaded on a pretext, solely for the purpose of allowing the West to rape their resources.

But the funny thing is that the Iraq war and the oil law may be a mistake for another reason. One of the things that's always mentioned in mainstream media coverage of Iraq is that the country is supposed to hold “vast, untapped” oil reserves. Impressive numbers are tossed out by people who salivate whenever these numbers are mentioned – 100 billion barrels! 115 billion barrels! Who knows, maybe even 350 billion barrels!!! (Sources: “Iraq Upgrades Reserves to 350 bil. Barrels, Invites New IOC's for Pre-Qualification,” 20 May 2008, www.globalinsight.com/SDA/SDADetail12591.htm; “The Challenge of Exploiting Iraq's Oil,” BBC News, http://news.bbc.co.uk/2/hi/business/7461042.stm)

These are curious numbers, but there is historical evidence that the oil “books” may have been cooked. For many years before OPEC, the oil wealth of the Mideast was exploited by Western international companies such as Exxon Mobil, Total, and others. Geologists for these companies established field size and reserve estimates based on sound science and engineering judgment. But when OPEC was formed after many of the assets of these companies were nationalized by Mideastern governments, the OPEC ministers set a policy of allowing each OPEC member country to produce a certain monthly oil quota, with that quota being set by the reserves each member country claimed to have. This was done to prevent the price of oil from being driven down to unacceptable levels, since the sale of oil made up so much of the gross domestic product of the OPEC member countries.

The problem with this arrangement was that since the prosperity of member countries depended so heavily on the selling of their oil, they were under great pressure to inflate their reserve numbers so that they would be allowed to sell more oil (remember, this was over two decades before the present oil shortage we are now seeing). Therefore, just before the quota system was enacted, Kuwait published reserve figures of 63.9 billion barrels; Saudi Arabia published figures of 166 billion barrels, Venezuela reported 24.9 billion barrels, and Iraq claimed 43 billion barrels. But in 1985, when the quota system was in effect, Kuwait magically and mysteriously raised its stated reserves to 90 billion barrels. In 1988, Iraq raised its reserve figures to 100 billion barrels. And in 1990, Saudi Arabia raised its reserve figure to 257.5 billion barrels. No one knows whether these reserves are based on valid geological surveys or whether they are simply hot air. But the Saudis have claimed from 1990 onward that their reserves have remained at 260 billion barrels – even though they have been pumping over 9 million barrels a day ever since. Truly Saudi Arabia must be a magic land – a land not only of flying carpets, but of cars whose gas tanks never run dry, no matter how much they are driven! (Source: “Peak Oil: The Challenge, the Possible Responses,” Richard Heinberg, 24 August 2006,
http://www.holmgren.com.au/DLFiles/PDFs/HeinbergAdelaidePublic%20.pdf)

Now, if we assume that the Iraqi reserves have been overstated since 1988, and that the actual figure is somewhat less than 43 billion barrels, we can calculate how long Iraqi oil will last at present and/or desired rates of extraction. Even if we don't know the true extent of Iraqi reserves, we can formulate a pretty accurate guess, using a mathematical technique known as Hubbert linearization, which requires simply that we know the rate of extraction and the total amount of oil extracted to date. Thus it is possible to guess how much Iraqi oil will help America continue its extravagant and unsustainable lifestyle, and for how long that oil will sustain our way of life. We can then formulate a comparison: on the one hand, the total amount of recoverable Iraqi oil available to the U.S., along with the total economic value of that oil; and on the other, the total number of Iraqis killed in this present Gulf War, the total number of American soldiers killed or traumatized, the total amount of damage to Iraqi society, and the total amount spent by the U.S. on the war effort. But if even after that comparison, someone still thinks our seizure of that oil was worth the price, let that person compare the temporary benefit of enjoying stolen goods against the pain of everlasting judgment. Since I am an evangelical Christian, I believe in everlasting judgment. I do not sympathize with radical Islam; yet I believe that what was done in Iraq by the United States is wrong, and that it will have eternal consequences.

Which brings me to the second bit of news: there are two bills pending in Congress right now. One, HR 362, would authorize the President to conduct a naval blockade of Iran in order to prevent the import of refined petroleum products by Iran and to inspect all ships and cargo entering or departing Iran (Source: http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:hc362ih.txt.pdf). Senate Resolution 580 is similar, but milder in that it states that “nothing in this resolution shall be construed to authorize the use of force against Iran.” (Source: http://www.govtrack.us/congress/billtext.xpd?bill=sr110-580). These two bills are supposed to counter the threat posed by an Iranian nuclear weapons program, even though United States intelligence agencies issued a National Intelligence Estimate in December 2007 which stated that Iran halted its nuclear weapons program in 2003 in response to international pressure. Reasonable people would conclude that war with Iran is unnecessary and that therefore, the best policy in dealing with Iran is to maintain enough international pressure to persuade the Iranian government to exercise good global citizenship. But most of the decision-makers in Washington do not seem to be reasonable. Rather, they are intoxicated by the smell of oil – perhaps bazillions of barrels of vast, untapped reserves!

As far as daily life goes, it is supposed to get very hot in the Pacific Northwest this weekend (but we don't believe in global warming, now, do we? After all, James Dobson is working overtime to make sure that We Get It!) One advantage of the hot weather is that it enables environmentally friendly ways to dry clothes.

If you've never seen one of these, they are easy to construct: a few lengths of galvanized threaded pipe from Home Depot, some cement, some post-hole diggers, and a bit of cord, and you're in business. And clothespins are still widely available...

The Numbers Tell The Story, Part 1

I went shopping this weekend. Some prices at Winco (which saves costs by making customers bag their own groceries):

• Brown rice (bulk): 96 cents/pound (It was 55 cents/pound as late as February)
  
• Lentils (bulk): 88 cents/pound (Lentils were around 49 cents/pound as late as February)
  
• Sun Laundry Detergent (I can't remember the size right off, and I'm not at home now. It was the biggest plastic tub I could find of the stuff): $7.98 (Since last year, their biggest plastic tub shrank)
  
• Gillette Custom Shavers, 5-pack, disposable: $4.54

And as for gas prices...need I say anything?

Pages Of Your Book On Fire

A few news items caught my eye this week. First, Washington D.C. police chief Cathy Lanier and Mayor Adrian Fenty recently announced the launch of a program to impose “neighborhood safety zones” in the D.C. area as part of their strategy to “curb violent crime.” The “safety zones” are manned by D.C. police who seal off designated neighborhoods, establishing checkpoints at places of entry and exit into these neighborhoods, demanding proof of identification for anyone found outdoors in the neighborhoods, and arresting or removing anyone lacking a “legitimate reason” to be there. During the first week of this program, officers were sent to the safety zone checkpoints (barricades, actually) without proper training in constitutional rights, according to news accounts. The first neighborhood safety zone has been set up in the Trinidad neighborhood, whose population is primarily black. (Source: “Lanier plans to seal off rough 'hoods in latest effort to stop wave of violence,” The Examiner, 4 June 2008, http://www.examiner.com/a-1423820~Lanier_plans_to_seal_off_rough__hoods_in_latest_effort_to_stop_wave_of_violence.html)

Of course, this implies that the politicians who run D.C. believe, or want the public to believe, that those who commit crimes in their city are mainly black. This is reflective of a larger bias in the American criminal justice system, which stops, arrests, prosecutes and sentences members of minorities with far more severity than the rest of the population. In fact, minority males who commit a crime are likely to receive much stiffer sentences than non-minority males convicted of the same crime. A large part of the disparity in arrests and sentencing is due to the so-called national “war on drugs” which has been waged since the 1970's in the U.S. Though statistics show that crimes perpetrated by black and other minority persons as a percentage of the total minority population are the same or less than crimes perpetrated by whites, law enforcement is primarily targeted toward black and minority neighborhoods. As a result, as many as one in three young black males is in prison, serving a long and harsh sentence. (Sources: “Racially Disproportionate Drug Arrests,” Human Rights Watch, http://www.hrw.org/reports/2000/usa/Rcedrg00-05.htm; “The war on drugs' war on minorities,” Los Angeles Times, 24 March 2007, http://www.latimes.com/news/printedition/opinion/la-oe-huffington24mar24,1,3333535.story?coll=la-news-comment) (As an example, in 2006, teen actor Haley Joel Osment was arrested after a car crash for drug possession and driving while intoxicated. He was sentenced to three years probation, 60 hours in an alcohol rehabilitation and education program, a fine of $1500, and a minimum requirement of 26 Alcoholics Anonymous meetings over a six-month period. What do you suppose would have happened to me if I had been arrested for the same offense?)

This failure of our supposed system of equal justice is rivaled only by the failure of Federal law enforcement agencies to investigate and prosecute banks involved in steering minority families into predatory subprime mortgages. To be sure, the present mortgage meltdown has claimed a lot of victims from every background who wanted more than they could afford, and who thought they could get something for nothing. But the subprime market was targeted primarily at minorities, who were “steered” into subprime mortgages at a rate of 55 percent of black Americans versus 17 percent of whites. This took place even when the minority applicants could have qualified for a traditional mortgage with a lower interest rate. (Source: “Federal Reserve Study Finds Race Played Role In Steering Home Owners to High Interest Sub Prime Mortgage,” Gant Daily, 10 March 2008, http://www.gantdaily.com/news/11/ARTICLE/14770/2008-03-10.html)

But these items are merely signs that the oligarchs who run our society are happy to demonize, dehumanize and victimize those who are different from them. Those readers who are not from a minority background, and who are not (yet) poor should not grow smug or complacent, because they may be next in line for victimhood, as the people at the top of our economic system feed more desperately on those lower down. In his book, Reinventing Collapse, Dmitri Orlov has written a section titled “World's Jailers,” in which he describes how the American judicial system works well only for those who are rich. That system is perilous for the poor, no matter their color or ethnic background. Unfortunately, as the global energy crisis deepens and world petroleum extraction rates fall, more and more of us will become poor. More and more of us will become fair game for the rich, who will use every method to get what they want from us, even if it means using the courts to rob us of property or rights that are justly and rightly ours.

One of Orlov's more chilling statements is this: “If life without money is to become more normal for most people in the U.S, then it seems inevitable that the flow of humanity will become bifurcated. Those who are most helpless will find themselves on the inside (as in locked up), in institutional settings such as jails, asylums and hastily organized camps for the internally displaced...” As the global economy continues to unravel, and the U.S. economy with it, American society will become increasingly disordered, swelling the ranks of the suddenly poor and helpless. Many of these, being people who were formerly well off, will be very surprised that they are now being institutionalized.

And speaking of disordered societies, the second news item I noticed was the increasing severity of fuel price protests and strikes in Europe this week. Truckers in Spain and Portugal are striking, blockading shipping terminals, factories and large retail supply warehouses. Violent protests in Spain and Portugal have claimed at least two lives. Protests are spreading throughout Asian countries and India. A four-day truckers' strike began in Britain today.

Ostensibly the protests are about the burden placed on working class people by the high cost of fuel, which is coming on top of rising costs of food and other basic necessities. But that is only part of the story. The truth is that high and rising petroleum fuel costs are due to basic supply constraints caused by depletion of existing oil fields and the lack of new fields with sizes sufficient to satisfy global petroleum demand. We are at Peak Oil now. From here on, daily global petroleum production will decline, and there is nothing we can do about it. The well is running dry. This will lead to hardship and a forced change in the lives of almost everyone.

But hardship and forced changes are much easier to take when people honestly face the coming changes. The preparation is first and foremost a mental one, though practical details do follow afterward. So it was that England did so well during World War II under the leadership of Winston Churchill, who told the British people the truth about the world in which they found themselves, the threat they faced, and the steps they needed to take to deal with that threat. Therefore, the British faced their hardship by a heady dose of realism. There have been other times during the 20^th century in which heads of state told difficult truths to their people, and the people successfully prepared themselves for difficulty.

The last time a head of any government tried to tell his people honestly about dwindling energy supplies, that head of state was President Jimmy Carter, and his message was that we Americans would have to learn to live well on less. Unfortunately, President Carter was unpopular due to his almost losing the Cold War, but his unpopularity on that front gave Americans a convenient excuse to throw away his talk of learning to live on less. Since then, no American politician has seriously talked about making realistic preparations for the times now upon us. Rather, both American and foreign politicians and media outlets have been trained by their corporate masters to deliver a message that happy times are here to stay, and that the sensible thing to do is to spend and consume our lives away. What we are seeing in the rest of the world is simply the reaction to hard times on the part of people who have not been mentally prepared for those hard times by a strong dose of truth telling. Thankfully, there is much good information on the Internet for those who want a straight dose of the truth. Yet the worldwide protests show how few people have availed themselves of that information. What will people do when things get much worse in the U.S.?

And that leads me to the third bit of news: the Weekly Petroleum Status Report published by the Energy Information Administration (EIA) of the U.S. Department of Energy. According to the EIA, weekly petroleum inventories in the U.S. have been falling by between 3 and 9 million barrels per week for the last four weeks. According to the weekly report published on 11 June 2008, U.S. crude oil inventories stand at 302.2 million barrels. This is troubling news. First, it means that the U.S. has been unable to produce enough of its own oil or import enough oil from other countries to meet U.S. demand; therefore we are now drawing down our own stored reserves. Secondly, only a small portion of that 302.2 million barrels is actually a reserve. 270 million barrels is the minimum operating level that must be in the system of U.S. refineries and processing plants at all times. If U.S. stocks dip below 270 million barrels, then refineries have to start shutting down.

And right now, it is becoming more and more difficult to import oil from other nations, as demand throughout the world increases and supplies are exhausted. We could therefore be facing a situation within the next 6 weeks to two months in which we experience a sudden super-spike in oil prices and corresponding price increases for finished petroleum products like gasoline and diesel fuel, and we could even begin to see significant shortages in the U.S. I do not pretend to be an oil industry expert; I'm just a “peak oil junkie.” But I'd be making plans for dealing with interesting times, if I were you.

* * *

Ah, but what shall I say about this city in which I now live? There are many days where its downtown seems like a jewel, its bridges spanning its rivers like precious metal rings encircling gilded fingers. I certainly enjoy this place more than Southern California, and am happy for my job transfer, even though it's colder here and much rainier. For one thing, it's much easier to commute by bicycle here than it was there, where most drivers seemed only a hairsbreadth away from throwing murderous tantrums with their outsized, overpowered monster vehicles. There are tons of farmers' markets here, because there are still lots of farmers here, whereas most land in Southern California only grows houses and strip malls now. Public transportation is much more accessible and convenient here, whereas in Southern California, you can get to many places faster by walking than you can by bus. There are many people here practicing the healthy habits that serve to make a life collapse-proof: self-sufficiency, reducing car dependence, gardening for food, creation of local culture, and so on.

Yet is this place the sort of enduring jewel, the hard, beautiful, costly rock that can endure the testing that is about to come on all of us? Is it resilient enough? Do enough people here “get it?” Or will this city prove to be like a jewel made of rock candy in a hard rain? Such a question is only fitting at the end of a week in which WTI crude hovers above $130 a barrel.

And what shall I say about Southern California where I am from? To what shall I compare it? What image, what metaphor will suffice?

The Myth of Inadequate Investment (?)

On 31 May 2008, in the “Drum Beat” section of the Oil Drum website, a Newsweek story on escalating oil prices was featured. The story was titled, “The Coming Energy Wars.” I only read the first few paragraphs; yet I was intrigued by its tone, and by the picture at the top: a fire-lit nighttime shot of people in France protesting high fuel prices. The story spoke of the shock that rising oil prices has already caused throughout the world, and warned of the turmoil to come if oil prices rise rapidly to $200 a barrel. It seems that the reporters at Newsweek even grasped the threat such prices would pose to globalism, and to retailers such as Wal-Mart and the people who depend on such retailers for cheap imported goods.

But the thing that stood out to me was the frightened tone of the article. It's as if the Newsweek staff had actually been talking to me and I could hear the nervous quiver in their voices. For so long, the mainstream media has served up stories of sports, sex and celebrity in its bid to prevent Americans (and Canadians and Brits as well) from seriously considering the trends and events that really matter in the world. But now those events are crashing in upon us with a force and an urgency that cannot be ignored. Yet the Newsweek staff was not so frightened that it forgot its primary mission in reporting such stories: to tell enough of the truth to sell magazines and advertising, while packaging that truth in a wrapping of propaganda in order to promote the agenda of its corporate masters.

For example, after citing “...the stranglehold OPEC imposed on the world in the 1970s,” the article lists reasons for the oil shock of 2008. While the article gives passing acknowledgment to shrinkage of estimates of reserves in oil producing countries, it also cites the usual suspects: increased demand from China and India, increasing global conflict, industry bottlenecks and falling investment. Falling investment or inadequate investment in oil field extraction are commonly cited by the mainstream media as reasons why oil extraction cannot keep up with demand. Major American and British papers and other journalistic outlets are especially quick to blame nonwhite, Third World nations for “lack of investment” when the supply of oil from those nations begins to diminish. The same “journalists” often criticize nations which nationalize their oilfields, saying as the Newsweek article does, that this “...often leads to lower output, due to the inefficiency of most state oil companies...”

This reminds me of Dmitri Orlov's analysis of the American practice of “economic development” as a means of promoting globalism. In that analysis, found in his newly published book, Reinventing Collapse, he states that the aim of US economic development policy in the Third World has historically been the extraction of a country's economic resources under terms most favorable to Western corporations and banks. The way it worked was as follows: The US and its allies, by means of the World Bank and International Monetary Fund (IMF), would extend economic assistance to the government of a “poor” Third World country in order to bring “prosperity” to that country. The government of the nation in question would usually consist of corrupt pro-Western stooges who had been placed into power through Western behind-the-scenes intervention. The economic assistance offered to the country consisted of a generous loan in order to finance the systems and machinery necessary to extract the country's resources. However, those systems and machinery were owned by American and other Western corporations, who were allowed them to reap almost all the profits of those resources, while paying a small percentage to the country's rulers as a bribe. The majority of the citizens of the country never saw a penny of those profits; however, they were saddled with paying down the debt of the original “loan.”

This is but one of many schemes which have been used by the United States and its allies to secure the natural resources of the rest of the world for Western consumption. However, over the last several years, these schemes have run into trouble, as far-flung countries with natural resources have refused to play the game of the West. Therefore, there is now a big public relations campaign in Western media, including such magazines as Newsweek, to portray the rightful owners of these resources as incompetent, unintelligent children who need Western expertise in order to properly “manage” their resources. This campaign is also being carried out by means of the mouths of pro-Western stooges in the governments of such nations as Mexico, whose president, Felipe Calderon, has been warning for months of dire consequences to the Mexican economy if the nation refuses to allow foreign investment in its national oil company, PEMEX. (Source: “Mexico's Calderon Seeks to Overhaul PEMEX,” Los Angeles Times, 9 April 2008, http://www.latimes.com/news/nationworld/world/la-fg-pemex9apr09,1,1405382.story)

In the Times story, the Mexican government states that Pemex's petroleum reserves had fallen 27% between 2002 and 2007, but seems to say that the answer is allowing international oil companies to have a stake in developing Mexico's oil wealth. No mention is made of geology or of the fact of depletion of existing fields, nor is it mentioned that when the oil production of the United States began to decline in the 1970's, the big private American oil companies were unable to stop the decline. I assert that the big private international oil companies are not saviors; rather, the aim of their PR campaign is simply to fool Third World nations into letting the internationals have the lion's share of a dwindling resource.

But such an assertion needs facts and proof to back it up. Very well. I think now of a podcast I heard a few months ago in which investment banker Matt Simmons was speaking. One thing he said was that all the talk of production shortfalls being caused by lack of investment or expertise in exporting countries with nationalized oil industries was false. He stated further that many of the nationalized oil companies have technical staff, finances and equipment that is equal if not superior to anything owned by the private internationals. Also, many of these countries depend on third-party oil service companies to undertake any technically demanding tasks that are beyond the skill of the national oil companies. These countries like the third-party service providers because they only charge a fee for their expertise and their work, and are not trying to take over ownership of any country's oil resources. According to Simmons, there is no lack of investment or expertise in the nationalized oil industries of many countries.

I base my opinion, therefore, largely on Matt Simmons, whom I regard as an expert. But his statements should be independently verifiable. So I am throwing out a challenge to anyone who reads this: do some research on the third-party oil service companies (those who provide oil extraction services but who do not own oilfields). See their expertise, who their clients are, and what their annual revenues are. Then present an analysis of the true extent of investment by the national oil companies in their own oil extraction, including money spent on securing the services of these third-party companies. Such an analysis could be published on a website such as the Oil Drum (www.theoildrum.com), where it would be subjected to an instant “peer review.” Such an analysis, if truthful and accurate, would provide a ready answer to journalists who write about a lack of expertise or investment by national oil companies. Some of the third-party companies are as follows: Schlumberger, Dresser Industries, and Fluor. A more complete Wikipedia list can be found at http://en.wikipedia.org/wiki/List_of_oilfield_service_companies. (If no one takes up my challenge within a month, I suppose I'll have to do it myself : ))